Categorized | Features, Legal Matters

Why You Should Get Your Beneficiary Designations Right

Beneficiary

Normally, when you sign up for a life insurance policy, retirement account such as 401 (K), IRAs, or other investment accounts, you are required to list a beneficiary who will receive the proceeds when you pass.

By Linda T. Cammuso

Many people are not aware how important beneficiary designations are and that a beneficiary form eclipses a last will and testament in court.

Take for example this situation. A man married for the second time. During his first marriage, he named his first wife as the beneficiary of his insurance policy and neglected to change that designation to his second wife. Following his sudden death, his first wife received the proceeds of the policy, even though according to the second wife, “He really meant to designate me as the beneficiary”.

Normally, when you sign up for a life insurance policy, retirement account such as 401 (K), IRAs, or other investment accounts, you are required to list a beneficiary who will receive the proceeds when you pass. To many people, adding a beneficiary to a contract is a simple act and, once done, they don’t ever look back on whether that designation makes sense given their current situation. That is a mistake.

Life happens, you may have a fall out with your beneficiary, he/she might predecease you, may get divorced and remarried, or become a parent — all of which warrant a review of your beneficiary designations. An additional consideration is that a plan administrator could have made a mistake and entered the wrong name on a beneficiary form. Keeping your beneficiary designations current is your responsibility.

Benefactor designations should be checked periodically. When you do so, consider whether your intended beneficiaries are financially vulnerable based on age, marital status, health/disability, financial acumen, personal or professional activities that may expose them to lawsuits, prior bankruptcies, or judgements or any other reason.

Of equal importance is to discuss your designations with an attorney to ensure they are coordinated with your estate plan and to review your estate planning documents periodically to ensure that you have provided financial security for those you love.

Linda T. Cammuso is a founding partner of Estate Preservation Law Offices located in Worcester, Massachusetts. She is a skilled estate planning and elder law attorney and has authored many articles on elder care and long term estate planning issues. She has appeared on Money Matters Radio and has been a speaker for various community and professional organizations.

 

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